As El Salvador moves into year two as the first country in the world to adopt Bitcoin as legal tender, speculation of national adoption elsewhere in Latin America continues to draw attention to the region as the next global hub for cryptocurrency. Colombia is quickly emerging as an essential contributor to crypto as a burgeoning resource class in South America, specifically the impact of fintech activity in the city of eternal springtime, Medellin.
Medellin is rapidly becoming a destination for crypto tourism and a hotbed for developers building blockchain architecture and protocols. Awarded “Most Innovative City in the World in 2013” and “Best Place to live in 2020”, Medellin has nurtured its international reputation as a tech-forward incubator city for well over a decade, in tandem with the broader economic boom seen nationally since 2010. Medellin is the nexus for web3 activity in Colombia, consistently drawing investors seeking ground floor opportunities to support the development of local infrastructure.
Blockchain technology started gaining traction in-country in 2018, when presidential candidate Iván Duque Márquez publicly declared that ‘new technologies should allow for greater transparency in public finances and would rejuvenate opportunities to improve the quality of life for Colombian citizens.’ Márquez also cited the potential of immutable ledgers and trustless banking to quell tax evasion and money laundering. That same year, Colombia’s second largest city Bogotá ranked seventh in the list of ‘Top Bitcoin Cities’ with 87 active crypto businesses registering with the Ministry of Finance.
As is common in Latin America, a significant part of the country’s population is “unbanked”, in part due to the public’s distrust of traditional financial institutions, lack of access to savings accounts, or a simple preference for peer-to-peer commerce alternatives. Consequently, crypto purchasing trends in Colombia tend to skew towards either P2P exchange platforms or direct-buys from Bitcoin ATMs. Colombia hosts the highest number of bitcoin ATMs of any Latin American country, with the highest concentration of machines split between Bogotà at 32 and Medellin at 11.
Public polling suggests that 80% of Colombians are now open to engaging with cryptocurrency, with monthly transactions in crypto assets (primarily Bitcoin) rising to an estimated $70M USD. A young demographic of early adopters seeking accessible investment opportunities drive the surge in usage, along with government taking steps towards regulatory clarity, start-up success from Colombia’s “Sandbox” program (or LaArenera), and the benefit of using bitcoin for remittances that simplify Colombia’s traditionally cumbersome process for sending money out-of-country.
While the Colombian Central Bank and the Colombian Financial Supervisory Authority have not yet aligned on granting legal tender status to cryptocurrency, private forces driving expansion of the legal framework legitimizing crypto assets appear unwavering. There are intermediate steps being taken to establish trust among supervised institutions to participate in the payment crypto asset market, and 2023 will likely yield major progress bridging the legal and regulatory chasm to enable conversion between crypto and local Colombian pesos.
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